On Stability of Money Demand Model in Pakistan: A Super Exogeneity Testing Approach Using Indicator Saturation
Journal Title: Pakistan Journal of Economic Studies - Year 2022, Vol 5, Issue 1
Abstract
The study attempts to test the stability of money demand (M-D, hereafter) model in case of Pakistan under the shade of super exogeneity testing procedure with an amalgamation of recently developed techniques of selecting breaks or location shifts (data driven) using Indicator Saturation like; Impulse Indicator Saturation (IIS), Step Indicator Saturation (SIS) and Trend Indicator Saturation (TIS). The estimated VECM model of money demand (M2) with Real Income, Inflation Rate, interest rates (short and long term), Financial Innovation and Financial Development; reveals that the parsimonious model is structurally invariant and remain super exogenous to relevant class of interventions for parameters of interest during the stipulated period (1972-2018) in Pakistan and hence can be used for policy purposes. Consequently, Lucas critique refuted in case of Pakistan.
Authors and Affiliations
Muhammad Jawad, Hafsa Hina, Atiq-ur-Rehman
Keywords
Related Articles
- EP ID EP735661
- DOI -
- Views 79
- Downloads 0
Influence of Tax Awareness, Simplicity, and Knowledge on Voluntary Tax Compliance in Pakistan: The Mediating and Moderating Role of Tax Fairness and Social Norms
Tax revenue is one of the principal sources to accelerate government funds. Voluntary tax compliance can play the main role in accomplishing the target. This study explores the role of Tax Awar...
Governance, Financial Development, and Investment: The Role of Globalization
Private investment is known for its role in the socio-economic and technological improvement of a developing country. At the same time, the developing economies are characterized by a low rate of investment, poor quality...
Combating Covid-19 through Policy Rate management
The markup on domestic debt is single largest source of expenditures in the federal budget of Pakistan for last few years. These markup payments are determined by the policy rate which is deci...
Does foreign aid with political strings dampen or heighten growth? An analysis of aid-growth nexus in Pakistan
Pakistan has received around 1.3 billion dollars (current US$) on an annual basis from 1972 to 2014 in the form of bilateral and multilateral aid. While Pakistan’s per capita GDP (current US$) rose from 152 US$ in 1972 t...
Natural Resources Depletion and Economic Growth: Evidence from ASEAN Countries
The economic growth of any country determines how developed a country is. It determines the development of any economy. However, many factors such as less labor, fewer resources, destruction of land etc., are now devalua...